Beaumont Health took a “relatively slow” approach, said Dr. David Wood, the system's chief medical officer. The new contract comes after strategic preparation for new reimbursement models, such as the 2013 agreement to clinically integrate with a large independent physician group.
Executives did not doubt that health reform and the marketplace would shift hospital payment toward more risk-based contracts, he said. But with no experience and potential financial risk, Beaumont Health executives decided to first work toward better coordination with physicians, which would potentially achieve the quality and savings targets that risk contracts require. “We wanted to get some experience,” he said.
Last year, Beaumont Health entered into an agreement with local physicians to work more closely on quality and efficiency to prepare for new payment models.
The new risk-based contract with Blue Cross and Blue Shield of Michigan, one of several the insurer announced this week, is Beaumont's entry into payment models that will become far more common in coming years, he said. “It's a start down that road.” Indeed, Beaumont Health will meet later this week with a nearby Medicare accountable care organization about a potential partnership.
The risk contract will edge Beaumont Health away from the dominant payment model that rewards providers based on the volume of costly diagnostic tests and procedures they perform. Policymakers cite pay-for-volume as one culprit behind the rapid escalation in health spending prior to the recession that ended in 2009.
“We have a perverse system,” said Stephen Anderson, vice president of provider contracting and network administration for the Michigan Blues carrier. “We don't pay providers do to the right things.” The bonus offered to systems that slow health spending is an incentive to use care coordination that promotes health and prevents hospital visits, he said.
Under the contract, hospitals that hold down per member, per month costs will receive some of what they save the insurer.
Blue Cross and Blue Shield of Michigan has rapidly expanded its use of risk-based contracts from five hospitals in 2012 to 24 hospitals that account for 43% of what the insurer spends on hospital care each year, Anderson said. The Blues will monitor quality performance separately through a performance-based contract for physicians already in place.
The Michigan Blues announced the Beaumont contract this week, as well as contracts other contracts in the state with Ascension Health's Michigan operations; MidMichigan Health, Midland; Oakwood Healthcare, Dearborn; and Botsford Hospital, Farmington Hills.